There are few greater feelings than being able to purchase the home of your dreams. It’s the culmination of all the effort put into comparing options, making offers, scheduling the inspection, securing financing, and taking the risk with an Earnest Money Deposit. When it’s finally time to close, you’ll need to be prepared to send your Cash to Close payment and officially seal the deal.
In today’s fast-moving market, the best way to move through a deal quickly is by wiring the money electronically. Long gone are the days where closing a sale involves a briefcase full of money or a handwritten check. After all, checks can bounce, and who really trusts a briefcase full of cash?
While it might seem intimidating to send large sums of money in this manner, learning how to wire money is quite simple and trusted by over half a million people, and growing every day. Before you dive into sending a large sum of money, it’s essential to review the steps of how to wire money so that you know your money ends up in the right hands.
What is a wire transfer?
A wire transfer - sometimes referred to as a bank transfer, credit transfer, or EFT - is an electronic transfer of money from one bank or credit union to another (although it can be within the same bank). It’s a speedy way to send money as the money will likely be available within the same or next day for immediate use. The SWIFT (Society for Worldwide Interbank Financial Telecommunication) network or Fedwire network is typically used for wiring money, allowing for both international and domestic transfers to occur.
The two points in the home buying process at which you’ll need to send large sums of money are the Earnest Money Deposit or EMD payment and Cash to Close payment. An EMD is just a fancy name for a deposit you put down to show a seller that you intend to buy the home and won’t renege on the deal - typically 1% - 3% of the total purchase price. Unlike the down payment paid at the closing of escrow, the EMD money will be credited towards your down payment later in the process. Cash to close includes much more - all of your closing costs, down payment, and EMD credit.
The option to wire money has grown in popularity for its security and ease of use. It’s considered safer because both parties involved in the transaction are typically required to be account holders at their respective financial institutions. A reputable bank verifies a new account holder’s identity when they open an account, thus adding an extra layer of protection for you when sending money to someone new.
What do you need to start a wire transfer?
Wiring money, or sometimes referred to as wiring funds, is just about gathering some key information from the recipient and reaching out to your bank. Starting the process for a wire transfer can be done through your bank’s online portal, if available, or you may have to visit a branch to request the wire transfer in person. Some banks require in-person requests for large sums like those involved in a real estate closing, and they might charge a fee of up to $75 for wiring money, so don’t be surprised.
The wiring instructions will include all of the title or escrow company’s information - the financial institution’s name, an account number, and a routing number or ABA number (American Bankers Association). Once you’ve got that in order, you need to specify how much money will be sent and prepare accordingly. Both amounts will vary based on the terms set forth between you and the title or escrow company, so make sure you’re accounting for everything.
You’ll need to have the details of the account you’re sending the money from, if you don’t already know it, you can often find it online, through your bank’s mobile app, or by calling your bank over the phone. Confirm with your bank that the money is available to be transferred - if the money isn’t available, you won’t be able to close on the home.
Before you initiate the wire transfer:
- Ask to have the address of the property you’re purchasing added to the notes section of the wire transfer’s summary. This gives the title company more context to the payment’s purpose when it comes through on their end.
After you’ve sent the wire transfer:
- Once you’ve sent the wire, you’ll receive a receipt of the wire and where it was sent. Make sure to keep this receipt for your records. The money will move from your bank to its correspondent bank for handling the money before moving on to the recipient’s bank.
Tip: Make sure to request the Federal Reference number or ‘fed ref’ number from your bank or financial institution - it’s between 16 and 20 digits long and can be found on the wire transfer receipt as well. The federal reference number can be used for tracking the wire, just like a package in the mail, so it will help identify it when referencing it with your title or escrow company.
Was the wire received?
Wire transfers almost always arrive on the same day they are sent, but they’ll likely arrive the following business day if sent later in the day. You can simply call the title or escrow company to confirm the transfer to ensure its delivery - be sure to provide your title company the amount of the wire and the federal reference number for making the exact match.
Can you reverse a transaction?
Unlike canceling a check, wire transfers are immediate and cannot be reversed once they are initiated. This is why it’s crucial to verify all of the information beforehand and be sure you are ready to send the money.
Avoiding fraud risk during the process
While it might seem simple to collect all of the required information and send the money through to your title company, there are always people interested in stealing such large sums of money. Fraud is not uncommon when wiring money, and it’s important to be aware of this during every stage of the process, especially at closing.
Fraud usually comes in the form of someone sending you “updated” or “new” wiring instructions to direct the money into a fraudulent account instead of your title company’s account. Always call your title company to confirm any changes made in the transaction process before proceeding. If you’d like to hear about fraud cases (many times from those involved), trends, and how to protect yourself, you can register for CertifID’s monthly webinar “To Catch a Fraudster.”
What happens if I am a victim of fraud?
Even with extra precaution, it’s still possible to fall victim to wire fraud. Hackers and scammers are more creative now than ever before and have learned how to trick people with complex scams. If this happens to you, don’t delay in taking steps to recover your money. Scammers move very quickly once they’ve fooled someone, and you’ll want to act immediately.
Your first point of action is to contact your bank. You’ll need to provide them with all the information about the wire transfer (grab the EFT receipt), how you were scammed, and request to initiate a “SWIFT recall” on the transfer. Following that, you’ll want to take the crime to the federal level with a formal complaint to the FBI’s Internet Crime Complaint Center (IC3). Submit all the information you have on the crime, including any action you and your bank have taken. Read more about the other steps needed for recovering from fraud and what you can do. If you believe you’ve been a victim of wire fraud, you can share your information and CertifID may be able to help.
Wire transfers are a safe and secure way to send large sums of money as long as the proper precautions are taken. Learning how to wire money, understanding the process, and working with your bank help make this portion of the home buying process a little more seamless. Always verify the information in each stage of the process and communicate with your title or escrow company as you proceed.
